Central Pattana Public Company Limited Management's Discussion and Analysis Consolidated Financial Results: 3Q09 and 9M09 Overall Performance Central Pattana Public Company Limited ("CPN") reported its 3Q09 consolidated net profit of 550.0 MB, declined 6.3% q-o-q, as the previous quarter performance included a non- recurring after-tax gain of approximately 46.2 MB from an acquisition of additional investment units in The Thai Business Fund 4, a subsidiary. Without the one-time gain, 3Q09 consolidated net profit would have increased by 1.7% q-o-q. Consolidated revenues (rental & service income, revenues from hotel operations and food & beverage sales) reached 2,782.9 MB, slightly up 1.1% q-o-q, primarily due to a full quarter contribution of the newly opened CentralPlaza Chonburi (opened in May 2009). On a y-o-y basis, 3Q09 consolidated revenues (rental & service income, revenues from hotel operations and food & beverage sales) grew 28.8%, mainly from the new projects. However, consolidated net profit showed a decrease of 3.9% as 3Q08 performance incorporated with a non-recurring after-tax income of 27.9 MB from renovation charged back to tenant at CentralPlaza Bangna. Without the non-recurring item, 3Q09 would have grown 1.0% y-o-y. For the past nine months, CPN's financial performance was largely a result of the four new projects - CentralPlaza Chaengwattana (opened in November 2008), CentralFestival Pattaya Beach (opened in January 2009), CentralPlaza Udon Thani and Centara Udon Thani Hotel (acquired in April 2009), and CentralPlaza Chonburi (opened in May 2009) - driving an exceptional growth in revenues. With special rental discount (normal business practice) and relatively lower occupancy rate during the initial stage, the new project normally yields lower margin than matured one. For the period of 9M09 consolidated revenues (rental & service income, revenues from hotel operations and food & beverage sales) grew 27.4% y-o-y while consolidated net profit, without the non-recurring items, gained marginally by 0.8% y-o-y Table 1: Consolidated Results Summary Consolidated Result 3Q08 2Q09 3Q09 YoY% QoQ% 9M09 YoY% (Bt mil) Chg Chg Chg Revenues 2,160.3 2,751.8 2,782.9 28.8% 1.1% 8,132.8 27.4% Retail 1,820.9 2,301.5 2,360.8 29.6% 2.6% 6,887.6 28.0% Office 220.0 226.3 221.1 0.5% (2.3%) 666.1 2.8% Hotel 0.0 36.3 38.7 n/a 6.7% 75.0 n/a F&B 111.8 180.7 156.6 40.1% (13.3%) 484.4 45.9% Other rental income 7.5 7.0 5.7 (23.9%) (18.1%) 19.8 (16.0%) Gross profit 936.1 1,085.6 1,063.8 13.6% (2.0%) 3,230.0 14.3% Retail 832.1 937.3 948.4 14.0% 1.2% 2,862.4 12.3% Office 85.8 95.3 68.2 (20.5%) (28.4%) 241.2 33.5% Hotel 0.0 21.0 23.2 n/a 10.3% 44.2 n/a F&B 18.2 32.9 24.2 33.3% (26.4%) 82.8 5.5% Other rental income 0.0 (0.9) (0.3) n/a n/a (0.6) (27.6%) Operating profit 840.7 888.7 775.4 (7.8%) (12.7%) 2,535.6 5.6% Net profit 572.5 587.0 550.0 (3.9%) (6.3%) 1,740.2 1.8% EPS (Bt) 0.26 0.27 0.25 (3.9%) (6.3%) 0.80 1.8% New Developments As for the other three under-developing projects - CentralPlaza Khon Kaen, Hilton Pattaya Beach Hotel (the hotel component of CentralFestival Pattaya Beach Project), and CentralPlaza Rama IX - construction is progressing as per schedule. During the global liquidity crisis and weak market sentiment, new developments have been funded through internal cash flow, bond issuance and long-term bank loans. CPN has secured long-term loans from banks with credit line of totaling 8,000 MB and issued 5,200- MB of unsecured bonds. (*Please refer to session: "Capital Structure" for more details.) Upon improving market condition the plan to raise fund through CPN Retail Growth Leasehold Property Fund ("CPNRF") was reactivated and the fund raising through divestment of assets at CentralPlaza Pinklao Project was completed in the beginning of November 2009. Fund proceeded from CPNRF will be used to repay a portion of borrowings and finance new projects. Operational Performance Summary Currently CPN managed 14 projects, comprising of 14 shopping centers, six office towers, two residential projects, and one hotel. As at September 30, 2009, CPN managed retail leasable area of totaling 908,454 sqm. This includes "Education Zone", a new retail space of approx 1,640 sqm, launched in 3Q09 at CentralFestival Pattaya Beach and retail leasable area of CentralPlaza Rama 2 and CentralPlaza Ratchada-Rama 3, totaling 133,309 sqm which have been transferred to CPN Retail Growth Leasehold Property Fund ("CPNRF") of which CPN acts as the property manager. At the end of 3Q09, occupancy rate for CPN's retail malls averaged 96%, unchanged from the previous quarter. Effective rental rate of retail space averaged 1,246 Bt/sqm/mth, down 2.7% y-o-y and down 0.4% q-o-q. This was attributed to lower rental rates of new provincial malls in addition to special rental discounts given to tenants at the new malls during their initial stage. For comparative purpose, excluding the four new malls, effective rental rate was up 1.4% y-o-y and 0.4% q-o-q to an average of 1,299 Bt/sqm/mth. Occupancy rate for CPN's offices averaged 85%, unchanged from 2Q08. This is mainly due to low take-up rate at the initial stage of the new Chaengwattana's office (opened in March 2009), which stood at 23% as at 3Q09 (up from 8% and 20% in 1Q09 and 2Q09, respectively). The remaining space is expected to be leased out by 2011. Table 2: Operation Statistics Retail Shopping Centers Net Leaseable Occupancy Rate (%) Area (Sqm.) 3Q08 2Q09 3Q09 Ladprao 55,583 99% 97% 97% Ramindra 17,159 99% 100% 98% Pinklao 54,220 99% 98% 98% Pattaya Center 15,225 100% 99% 98% Ratchada-Rama3 18,192 100% 99% 100% Chiangmai 76,086 99% 99% 98% Bangna 57,426 98% 98% 98% Rama2 5,937 100% 100% 100% Rattanathibet 77,283 99% 97% 98% CentralWorld 185,545 92% 97% 96% Chaengwattana 65,604 n/a 93% 92% Pattaya Beach Festival 57,659 n/a 89% 85% Udon Thani 49,471 n/a 100% 99% Chonburi 39,755 n/a 83% 89% Total 775,145 97% 96% 96% Offices Net Leaseable Occupancy Rate (%) Area (Sqm.) 3Q08 2Q09 3Q09 Lardprao 17,719 99% 96% 98% Pinklao A 22,426 86% 93% 91% Pinklao B 11,334 89% 87% 94% Bangna 10,007 100% 92% 92% CentralWorld 82,796 96% 94% 94% Chaengwattana 19,462 n/a 20% 23% Total 163,744 95% 85% 85% Financial Performance Summary Total Revenue Total revenues consisted of rental & service income, revenues from hotel operations and food & beverage sales. In 3Q09, consolidated total revenues grew 28.8% y-o-y to 2,782.9 MB. These comprised of; a) Rental and service income of 2,587.6 MB, up 26.3% y-o-y, mainly from additional income of the new projects- CentralPlaza Chaengwattana, the office at Chaengwattana project, CentralFestival Pattaya Beach, CentralPlaza Udon Thani, and CentralPlaza Chonburi. b) Revenues from hotel operations of 38.7 MB from the newly acquired Centara Udon Thani Hotel. c) Food and beverage sales of 156.6 MB, up 40.1% y-o-y, mainly from the four new food parks at CentralPlaza Chaengwattana, CentralFestival Pattaya Beach, CentralPlaza Udon Thani, and CentralPlaza Chonburi. Compared to the previous quarter, total revenues slightly grew by 1.1% q-o-q. This was largely a resulted of a full quarter contribution of CentralPlaza Chonburi, increase revenue of Centara Udon Thani Hotel, however seasonal drops in food & beverage sales. Other Income Other income consisted of incomes from costs charged back to tenants (such as property tax, insurance premiums, renovation costs, etc.), event sponsorships, and other non-recurring incomes. In 3Q09, other income amounted to 146.5 MB, declined by 32.4% y-o-y. This was attributed to an additional property tax income at CentralWorld and a non-recurring renovation (charge back) income of 39.9 MB at CentralPlaza Bangna. Likewise on a q-o-q basis, other incomes dropped 35.3% as there was a one-time gain of 66.0 MB from an acquisition of additional investment units in The Thai Business Fund 4, a subsidiary. Total Cost Total costs comprise utilities, depreciation and amortization expenses of rented properties, on-site personnel costs, repair & maintenance expenses, property tax and operating cost of food center. In 3Q09 consolidated total cost reported at 1,719.2 MB, up 40.4% y-o-y. This increase was primarily due to three distinct sources: a) Additional operating costs and depreciation and amortization expenses of the new projects previously mentioned. b) Higher sub-lease payment of CentralPlaza Lardprao after a renewal of its sub-lease agreement. c) Additional operating cost of the new food centers ("Food Park") at the new projects. On a q-o-q basis, total costs increased by 3.2%, mainly from compounding effect of a full quarter book of operating costs and depreciation and amortization expenses the newly launched CentralPlaza Chonburi and declined operating cost of food center, which was relatively in-line with the seasonal decrease in food and beverage sales. Total Operating and Administration Expenses Total operating and administration expenses constitute expenses on personnel, marketing and promotion costs, office supplies, professional fees, depreciation and amortization of office equipments. In 3Q09, total operating and administration expenses increased by 22.6% y-o-y to 441.0 MB, as a result of additional advertising and promotion expenses to promote and boost visitor traffic of the newly opened malls and higher personnel expenses from an increase in number of employees to support business expansion. On a q-o-q basis, total operating and administration expenses slightly declined by 2.7%, as the previous quarter expenses included the marketing and promotion spendings for the opening celebration of CentralPlaza Chonburi. Net Profit 3Q09 consolidated net profit registered at 550.0 MB, down 3.9% y-o-y and 6.3% q-o-q as 3Q08 and 2Q09 net profits incorporated with the non-recurring after tax gains of 27.9 MB and 46.2 MB, respectively. Without the non-recurring item, 3Q09 net profit would have gained 1.0% y-o-y, primarily attributed to a) marginal profit at initial stage of the newly opened projects, b) lower interest income, and c) higher financial charges upon issuing more debts to support business expansion. Compared to the previous quarter, without the one-time gain, 3Q09 net profit would have grown 1.7%, reflecting lower margin at the initial stage of CentralPlaza Chonburi and seasonal lower contribution from food center operations. Table 3: Key Financial Ratios Key Financial Ratios 3Q08 2Q09 3Q09 Liquidity ratio Current ratio (times) 0.6 0.6 0.6 Quick ratio (times) 0.5 0.4 0.4 Cash generate from operation ratio(times) 0.5 0.6 1.5 Days account receivable (days) 21.8 16.3 14.4 Profitability ratio Gross profit margin (%) 39.4% 36.5% 36.3% Operating profit margin (%) 29.4% 22.3% 19.6% Net profit margin (%) 22.8% 19.0% 18.2% Return on equity (%) 16.6% 15.6% 14.4% Efficiency ratio Return on assets (%) 5.9% 4.9% 4.5% Return on fixed assets (%) 7.2% 5.9% 5.3% Assets turnover (times) 0.2 0.3 0.2 Financial policy ratio Obligation Recovery Service/1(times) 0.7 0.2 0.8 Net debt to equity (times) 0.8 1.1 1.1 Net debt to EBITDA (times) 2.4 3.1 3.3 Interest coverage /1(times) 10.1 5.8 12.2 Note:/1 Cash generated from operation excludes cash payment of endorsed promissory notes Financial Position as at September 30,2009 Assets As at September 30,2009, consolidated total assets registered 48,943.1 MB, increased by 5,159.3 MB or 11.8% from the position as at the end of FY2008. This mainly reflected buildings and equipments of the four new projects and construction in progress of under-developing projects. Liabilities Consolidated total liabilities stood at 33,366.8 MB, increased by 4,756.3 MB or 16.6% from the position as at the end of FY2008. The increase was mainly due to the issuing of new debts to support business expansion and the payable for the leasehold right (up-front fee) of CentralPlaza Lardprao. Shareholders' Equity Consolidated total shareholders' equity registered at 15,576.3 MB with total retained earnings of 11,328.4 MB, increased by 1,021.4 MB from that of FY2008. The increase was mainly attributed to 9M09 net profit and dividend payment of 719.0 MB (0.33 Baht/share). Table 4: Financial Position Balance Sheet (Bt mil) FY08 2Q09 3Q09 %Change FY08 Total Assets 43,783.8 49,218.1 48,943.1 11.8% Total Liabilities 28,610.5 34,187.6 33,366.8 16.6% Interest-Bearing Debts 16,445.1 19,311.1 19,446.0 18.2% Shareholder's Equity 15,173.3 15,030.6 15,576.3 2.7% Retained earnings 10,307.2 10,778.4 11,328.4 9.9% Capital Structure During 9M09, CPN repaid 6,069.1 MB of borrowings and raised 9,070.0 MB of new debts to support business expansion. These new debts comprised of a) 5,200 MB of unsecured bonds at interest rate of 4.00%-4.75% pa. b) 1,650 MB of 7-yeared bank loan at interest rate MLR- 2.0% pa., and c) 2,220-MB of revolving short-term borrowings. These brought up the interest-bearing debt to 19,446.0 MB with a weighted average cost of debt of 4.4% per annum, compared to 5.2% of FY2008. Financial charges in 9M09 increased by 61.6% y-o-y. This was a result of the increase in interest-bearing debt and capitalization of interest expenses in 9M08 during developing new projects. Total CAPEX for 9M09 was 6,126.9 MB, representing 70.0% of the revised FY2009 CAPEX of 8,690 MB. The remaining committed CAPEX will be funded by operating cash flows and the divestment of assets to CPNRF. Noted that CPN has leased/subleased parts of assets at CentralPlaza Pinklao Project to CPNRF for 15 years. The fund raised through CPNRF was completed in the beginning of November 2009 to repay short-term loans and finance under- construction projects. As at September 30, 2009, net interest-bearing debt to equity stood at 1.1x, up from 0.8x at the end of FY2008 while net interest-bearing debt to EBITDA was at 3.3x, increased from 2.9x at the end of FY2008. Interest-bearing debt comprises of 64% fixed and 36% floating interest rate.